Elon Musk’s $0 Salary Encapsulates the Legend of Tesla

For a self-made billionaire, Elon Musk doesn’t seem to know much about making money—at least not for himself. The Tesla CEO's new compensation package, announced Tuesday, hinges on Musk's ability to transform the budding automaker into one of the world’s most valuable companies by producing long-term increases in market value, and revenue and profits.

Musk will be paid in stock options, which will vest over ten years in a series of 12 tranches. To secure each, Musk must reach a pair of milestones, one related to Tesla's market value, the other to its revenue and profitability. With every tranche, the target market value goes up by $50 billion. If he can hit all 12 targets and grow Tesla's current value of $59 billion to an astounding $650 billion, his stock award could be worth $55 billion. That's the good part.

But, as Musk told The New York Times, “If all that happens over the next 10 years is that Tesla’s value grows by 80 or 90 percent, then my amount of compensation would be zero.” (Musk does make minimum wage salary, per California law, but he told the Times he doesn’t cash the checks.)

It is, shall we say, a strong move. The Times called it maybe the “boldest pay plan in corporate history.” Business Insider, however, deemed it “delusional.” That’s because, despite Tesla's 17-fold increase in market share over the past few years, it's far from profitable. At one point last year, the 14-year-old company was burning through $8,000 every 60 seconds, according to Bloomberg News. It has a longstanding habit of missing self-imposed deadlines, sometimes by years. Just this month, it pushed back its production targets for the Model 3—the car that could make its business work, or destroy it—for the second time.

The compensation package is subject to shareholder approval, but if investors bite, it’s great news for them: Either Tesla becomes one of the most successful companies ever, or they save money by not paying the CEO. It’s potentially good for employees, too, all of whom receive equity in the company and are thus personally vested in its success.

But for a company whose identity is indelibly tied to that of its CEO, this amounts to a huge bet on a huge future. It pushes Musk to go for radical success, perhaps at the expense of creating a stable, reasonably profitable business. There are lots of reasons to think Musk can’t get Tesla anywhere near those goals—and at least a few to think he can.

Let’s start with the fact that Tesla is no ordinary automaker. Under Musk’s guidance, it has built a fanbase whose support bleeds into zealotry. Hundreds of thousands of people put down $1,000 deposits for the Model 3 in 2016, more than a year before they heard its specs, saw its interior, or knew its final price. As a struggling startup, it made it through the 2008 financial crisis that froze VC funding and devastated auto sales. It transformed the popular image of electric vehicles from golf carts to sports cars. It delivered the first semi-autonomous vehicle and pioneered the use of over-the-air software updates to improve cars it had already sold.

Great stuff, but nothing that should convince shareholders Tesla can make tons of money in a century-old auto industry where competitors long ago mastered managing complex supply chains, operating within tight profit margins, and hitting deadlines—and are now applying that deep knowledge to creating their own high-end electrics and semi-autonomous features.

Perhaps, though, the competition's advantages don't matter. Tesla isn’t an automaker, or at least not exclusively. It wants to be a vertically-integrated energy company, one that will sell you solar panels to slap on your roof, where you can make your own clean energy, use it to power a crazy fun to drive car, and store the remaining juice in a giant, Tesla-made battery. To mark the shift, in February 2017, Musk dropped the "Motors" bit of Tesla's original name. He did not, however, offer an explanation for how this kind of vertical integration will help Tesla's bottom line.

Forget all that. None of it matters, either, because Musk’s unusual compensation package isn’t a bet on Tesla the Maverick Automaker or Tesla the Energy Megamarket. It’s a bet on Elon Musk the Soothsayer, the person who sees a hard-to-believe future and makes people believe it will come to pass.

Musk's striking combination of prescience and persuasion is all the more compelling right now, because the way we move is changing so fast and furiously. Cars are driving themselves. More and more people are eschewing automobile ownership. Huge chunks of the global market are pledging to ban the internal combustion engine. Every automotive CEO knows this and is scrambling to put their company in a position to take advantage, or at least survive. It’s easier to imagine a world without General Motors or Ford right now than it was in the darkest days of the recession.

It’s because of this tumult that Tesla’s track record of blown deadlines and quality control issues matters less than its already legendary reputation for doing the seemingly impossible: making EVs cool, making self-driving real, making an army of superfans out of ordinary citizens. In other words, creating opportunities where others saw nothing. It’s worth noting that when Ford ousted CEO Mark Fields last May, it was mostly because Fields failed to offer a clear path into this new future.

No one knows how the world of cars and energy and mobility will change in the next few years or decades. But if you must bet on someone to figure it out—and in the process shower you with dolla dolla bills—it makes sense to go with Tesla. Because if it does hit those stupendous targets, it won’t necessarily do it as an automaker, or an energy provider, but as the company offering you whatever comes next. And it'll do it under the leadership of Musk, who no doubt will have some persuasive, likely out of this world, ideas for what to do with his $55 billion reward.

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